No beef with chicken sales

Burger giant McDonald's, riding a wave of poultry consumption that has boosted its bottom line, is betting that chicken will be a hit at breakfast too

May 13, 2008|By Mike Hughlett, TRIBUNE REPORTER

McDonald's Corp. wants you to believe that chicken is the next great American breakfast meat.

Sound far-fetched?

Remember, this is the company that revolutionized the chicken world with the McNugget, and two years ago slapped some poultry in a tortilla, called it a Snack Wrap and created one of the hottest concepts in fast food.

McDonald's just launched a marketing blitz for a new fried-chicken breakfast biscuit and fried chicken sandwich, each dubbed Southern-style. It's one of the company's biggest product launches in the past two years and marks the debut of chicken on McDonald's breakfast menu.

How well fried Southern-style food will play in the North during the breakfast hour is an open question, some analysts say. But the Southern-style line underscores the increasing importance of chicken to the Oak Brook-based fast-food giant.

Not only does chicken consumption continue to grow at a strong clip, but analysts say restaurant companies like McDonald's can fashion more menu items from chicken than from beef.

"If you think about McDonald's over the past few years and the improvements to its menu, it's really been driven by chicken," said Steven West, a stock analyst at Stifel Nicolaus. Indeed, chicken-related items on McDonald's menu outnumber beef-based products.

And McDonald's appetite for chicken has soared. The company bought 663 million pounds of chicken in the U.S. last year, up 59 percent from 2003. Its U.S. beef purchases, which totaled 795 million pounds in 2007, rose 10 percent during the same time.

It's not that McDonald's, the globe's burger heavyweight, is veering away from beef. In fact, the company's biggest-selling sandwich is the double cheeseburger, the anchor of its dollar menu. But chicken is where more of the action is.

McDonald's last big national burger rollout was the Big N' Tasty in 2001. But the company has added a new chicken item to its menu every year since 2003, said Wade Thoma, vice president of U.S. menu management for McDonald's.

In addition to its wrap, the firm has added a line of chicken-based salads and a family of premium chicken sandwiches. Plus, McDonald's plans "some kind of new chicken news" each year through at least 2011, Thoma said.

Chicken is one of four key areas the company identified in 2005 as critical for long-term sales growth, along with beverages, particularly specialty coffee; bolstering its already strong breakfast sales; and extending store hours. While the beverage initiative has been much chronicled, it is in its early stages compared with chicken.

Simple math is partly driving the chicken offensive, and not just at McDonald's: Per-capita chicken consumption has steadily grown over the past 25 years, while beef eating has declined.

Healthy image

The perceived healthfulness of chicken is a key driver of that trend, restaurant industry analysts say, although fried chicken sandwiches are often no less fattening than their beef brethren. For example, McDonald's new Southern-style sandwich has 420 calories, only 20 less than its double cheeseburger.

The adaptability of chicken compared with beef also appeals to restaurant operators, said Bob Goldin, executive vice president of food consultant Technomic Inc.

Burger King sells chicken fries, battered pieces of chicken shaped like a french fry. White Castle has its chicken rings, a poultry nod to the onion ring. And then there's the wrap, McDonald's melding of a chicken breast, either grilled or fried, with lettuce, cheese and sauce (chipotle, ranch or honey mustard).

The wrap's success has exceeded the expectations of both McDonald's and many restaurant industry analysts. And like most hit products, it has spawned competition. Wendy's began offering Chicken Go Wraps last month, while KFC launched its Toasted Wrap last winter, complete with an ad campaign that takes a shot at McDonald's.

McDonald's says its sales haven't suffered from the competition, and company spokesman Bill Whitman called the new crop of wraps "the sincerest form of flattery."

Ode to Chick-fil-A?

To some, the same could be said of McDonald's new Southern-style items.

"They may not admit this, but it looks like they copied this a little from Chick-fil-A," said Jack Russo, a stock analyst at Edward Jones.

Atlanta-based Chick-fil-A has for 40 years sold a fried chicken sandwich that bears a striking resemblance to the new McDonald's creation. Chick-fil-A, which is popular in the South, also has been selling a chicken breakfast biscuit since 1986.

McDonald's Southern-style items are simple affairs. The sandwich, which has a suggested retail price of $2.89, comes on plain steamed bun, with butter and two pickles its sole condiments. The biscuit, which goes for $1.89, comes adorned only with butter.